Advocacy

February 12, 2024

Pre-Budget Submission for the Federal Government 2024 Budget

The Honourable Chrystia Freeland, P.C., M.P.
Deputy Prime Minister and Minister of Finance
90 Elgin Street
Ottawa, Ontario K1A 0G5

Re: Ideas and recommendations in advance of Budget 2024

Dear Minister Freeland,

The Business Council of Alberta (BCA) is pleased to provide ideas and recommendations to the Government of Canada in advance of its 2024 budget.

We are a non-partisan, non-profit policy organization composed of the province’s largest enterprise chief executives and leading entrepreneurs. Our members represent the majority of Alberta’s private sector investment, job creation, exports, and research and development. We are dedicated to building a better and more prosperous Alberta within a strong Canada.

The federal government’s recent policy agenda has been ambitious. This agenda has included notable achievements in social policy like the creation of the Canada Child Benefit and the Canada Dental Care Plan, as well as the implementation of a national childcare program. It has also included significant movement on policy priorities related to energy and climate, and Indigenous reconciliation. More recently, issues related to immigration and housing have been added to the list.

As we approach Budget 2024, it is worth highlighting the economic context in which we find ourselves. Put simply, the situation is challenging. Inflation remains above target levels, interest rates are high (by recent standards), job creation is not keeping up with population growth, and the overall economy is slowing. Canada has proven resilient in the face of these pressures, as well as slower economic activity worldwide, but it is not immune to them. Most economists predict weak overall growth in 2024, kept in positive territory simply because of our surging population. On a per capita basis, the Canadian economy is already shrinking and is presently at about the same size as it was in 2018.

Against this economic backdrop, BCA believes that now is not the time to embark on major new spending initiatives in Budget 2024. Instead, we believe the government should focus on two things: working to fix and finish outstanding items on its current policy agenda; and renewing a commitment to achieve long-term fiscal sustainability. And all this must be done without undermining our international competitiveness and economic growth.

In this context, we offer the following ideas for consideration as the Government of Canada prepares its 2024 budget.

Fix and Finish

Budget 2024 should make it a priority to “Fix and Finish” outstanding items on its current policy agenda, including the following:

FIX the Clean Electricity Regulations:

Last year, BCA provided official comments and recommendations on the federal government’s draft Clean Electricity Regulations (CER). We believe that the current draft regulations will not strike the right balance between a clean grid on the one hand, and a reliable and affordable one on the other. While Alberta is committed to achieving a net zero electricity grid by 2050, the CER’s proposed timeline is unrealistic.

The CER’s one-size-fits-all approach doesn’t have the flexibility built in to avoid undue impacts on power affordability, economic competitiveness, and grid reliability. That’s why we’re looking for Budget 2024 to address deficiencies in the draft regulations and introduce corrective measures that will make the policy more flexible and pragmatic. These measures should include:

  • extending the end-of-life provision for gas-fired electricity generation;
  • aligning the performance standard with the real-world technological capabilities of carbon capture;
  • exempting cogeneration from CER capture;
  • relaxing the time-of-use and emissions caps for peaker units;
  • adopting a more workable definition of an emergency situation; and
  • introducing a wider variety of compliance options into the policy, like facility aggregation.

FIX Canada’s Approach to Climate Policy:

Like the CER, the federal government recently introduced a proposed framework for an Oil and Gas Sector Emissions Cap. This emissions cap layers yet another new climate policy on top of existing ones, creating an unnecessarily costly approach to reducing emissions that harms economic growth, limits Indigenous economic reconciliation, reduces government revenues, eliminates jobs, stokes regional tensions, and delays decarbonization investment decisions. Furthermore, carving out a single sector for an emissions cap undermines the function of carbon price signals and disproportionately impacts Alberta’s economic competitiveness.

But unlike with the CER, and as BCA has outlined in our submission to Environment and Climate Change Canada, fixing the emissions cap means scrapping the emissions cap and returning to first principles of sound climate policy. BCA believes that the cap is a fundamentally flawed concept, and there is no way to tweak it into a workable solution for Alberta. However, BCA remains supportive of Canada achieving net-zero emissions economy-wide by 2050. To do so, Budget 2024 should signal a shift in the federal government’s thinking about how it develops workable climate policy. This means making a 180-degree turn away from policies like the emissions cap and returning to the sound principles that defined this government’s greatest climate policy achievements:

  • Achieving emissions reductions at the lowest possible cost.
  • Designing simple and clear policy signals.
  • Committing to a sector-agnostic approach.
  • Ensuring regional fairness in the application of policy.
  • Retaining the ability for industry to compete globally on a level playing field.

FIX Canada’s immigration strategy to align with a prosperity-driven mandate:

Immigration has long been an important asset for Canada, and immigrants represent a growing portion of the labour force. But as Canada is set to welcome 1.5 million new residents between 2024 and 2026, more is needed to ensure success—for newcomers and current residents alike.

Over the last few years, immigration has significantly increased, exacerbating several pre-existing issues. Both settlement supports and the country’s housing stock have failed to keep pace with growing need. As well, despite higher levels of economic immigration, labour needs are not always met while many skilled newcomers remain on the sidelines. With immigration levels set to remain high, there are several issues that must urgently be addressed, including:  

  • a growing waitlist to access settlement services, especially for language learning which is one of the most important determinants of newcomer success;
  • an outdated Comprehensive Ranking System (CRS) that fails to accurately assess an individual’s economic potential in Canada; and
  • capital investment that is slow to respond to population growth.

Meanwhile, as noted earlier, per capita economic growth in Canada has stagnated. Over the last five years, Canadians have seen no real improvement in their quality of life, and in some areas (like housing affordability), a deterioration.  As Canada’s international standing falls, it risks missing out on attracting the individuals with the greatest economic potential.

Furthermore, a focus on the numbers and levels of immigration without fixing the underlying issues described above risks chipping away at long held popular support for immigration in Canada. As such, we believe the federal government must work to build a strategy for immigration that is not driven by numbers but by prosperity for all Canadians.

A prosperity-driven approach is one that better meets the needs of both newcomers and of the economy more broadly. Specifically, it should focus on three key components: supporting newcomer success; prioritizing individuals for economic immigration with the greatest potential; and implementing a coordinated plan for population growth.

First steps should focus on addressing current challenges, including:  

  • refocusing Canada’s immigration strategy to centre around per capita GDP growth and improved quality of life for all Canadians;
  • ensuring government funding of settlement services grows in line with current immigrant needs and the rate of immigration into the country;
  • evaluating and refining the CRS to better align with labour market demand; and committing to continuous improvement by re-evaluating selection criteria every few years; and
  • examining policy initiatives aimed at promoting and incentivizing private investment in critical infrastructure and housing.

FINISH building out and implementing the strategy outlined in “An Immigration Strategy for Canada’s Future”:

As well, the federal government must finish the work it has started to improve Canada’s immigration system. In conjunction with the release of the new immigration targets, the federal government also released a framework for immigration called An Immigration Strategy for Canada’s Future.

Developing this framework is a solid first step but there are many details left to be fleshed out, and a lot of work to do in executing this strategy. Furthermore, IRCC is faced with resourcing constraints that limit its ability to do this work at the urgent pace required.

As such, BCA strongly encourages the federal government to work in collaboration with other stakeholders to appropriately build out and implement this strategy. Specifically, it should outline a more detailed plan with concrete action steps, specific objectives, and a timeline for completion.

In particular, BCA is looking for more details and expedited action related to the following: 

  • Integrating housing and health care planning, along with other important services, into planning Canada’s immigration levels.
  • Strengthening the connection between economic immigrant selection and foreign credential recognition to ensure those that are selected for their ability to work in a regulated profession are able to do so quickly.
  • Developing and launching the Digital Platform Modernization which aims to accelerate and simplify the application process for prospective newcomers.

FINISH the Carbon Capture, Utilization and Storage Investment Tax Credit:

Alberta’s geography, emissions-intensive industrial base, and skilled labour all create the perfect recipe for the deployment and scale-up of carbon capture, utilization and storage (CCUS) technologies. BCA believes Alberta’s CCUS buildout will create a jobs boom and position the province as a global leader in industrial decarbonization efforts.

However, reducing carbon through CCUS is not a value-creating proposition on its own; it requires the right policy instruments to unlock capital investment and sustain reasonable operating costs over the long term.

Three years ago, Budget 2021 promised to help de-risk these projects by “introduc[ing] an investment tax credit for capital invested in CCUS projects” that would “come into effect in 2022.” And while this Investment Tax Credit (ITC) has been teased in several budgets and budget updates since, businesses are still waiting for it to become law. Multi-billion-dollar decarbonization investment decisions require this certainty.

As such, Budget 2024 needs to commit to the immediate passage of amendments to the Income Tax Act to operationalize the proposed CCUS ITC.

FINISH the Indigenous Loan Guarantee Program:

The Business Council has been a longtime advocate of the federal government stepping up to create financial mechanisms that help Indigenous Peoples participate in project developments and equity partnerships. We believe that increasing Indigenous economic opportunity in major project developments is a crucial step in advancing our shared commitment for economic reconciliation.

For this reason, we were pleased to see the federal government’s 2023 Fall Economic Statement promise to “advance development of an Indigenous Loan Guarantee Program to help facilitate Indigenous equity ownership in major projects in the natural resource sector.” Accordingly, we’d like to see Budget 2024 operationalize this commitment at the government’s earliest opportunity. However, in keeping with Article 3 of the United Nations Declaration on the Rights of Indigenous People, the proposed Loan Guarantee Program should provide access to capital for all natural resource projects that Indigenous Peoples choose to pursue, including oil and gas projects.

FINISH making improvements to major project review and permitting processes:

As outlined in BCA’s Future Unbuilt report, if there is any chance of achieving the federal government’s 2030 and 2050 climate commitments, Canada has to improve the speed, efficiency, and predictability of its major project review and permitting processes. In Budget 2023, we were pleased to see the federal government commit to “outline a concrete plan” by the end of the year “to improve the efficiency of the impact assessment and permitting process for major projects.”

Related to this, and in response to the recent Supreme Court decision on the Impact Assessment Act (IAA) itself, the federal government has committed to amending the IAA in Spring 2024. Broadly speaking, BCA is pleased to see the Impact Assessment Agency of Canada (IAAC) take seriously the Supreme Court’s decision; we are broadly supportive of the sections identified in the Act that require amendments.

We also believe this amendment process provides an opportunity for the federal government to clarify and/or further refine terms within the Act; and to consider ways to adjust impact assessment process and procedure improvements whether they require legislative changes or not. While we applaud the Ministerial Working Group on Regulatory Efficiency’s recent statement pointing toward potential areas to address, we would like to see more concrete actions taken to advance the recommendations in our Future Unbuilt report.

Accordingly, we are calling on Budget 2024 to move beyond signaling the government’s intent to improve regulatory processes, and take concrete steps towards actually improving them. We would like to see a detailed plan or policy statement that outlines the tangible steps the Impact Assessment Agency and the 10 federal departments and agencies responsible for regulating major projects will take to make Canada’s regulatory processes work quickly and efficiently.

Furthermore, as the government has promised, we would like to see the IAA brought into constitutional compliance at the earliest opportunity—preferably aligned with the Budget 2024 process. BCA will provide written comments to IAAC with recommendations and areas for further clarification within the Act in the coming days.

A Renewed Commitment to Long-term Fiscal Sustainability

Finally, we believe the government should be mindful of its longer-term fiscal trajectory as it prepares Budget 2024.

There has been a consistent trend in past federal budgets whereby the government has routinely increased spending above levels outlined in previous plans. For example, in Budget 2021, the federal government projected total spending in 2025-26 to be $466 billion. By Budget 2023, that had risen to $522.5 billion—an increase of more than 12% ($56.5 billion). And in the 2023 Fall Economic Statement, projected spending for 2025-26 increased by another $5.8 billion.

Strong revenue growth has, to date, allowed spending to rise without significant increases in the federal deficit. The challenge is that as the Canadian economy slows, revenue growth will follow suit, and, especially in the case of a serious downturn, spending pressures will once again mount. That scenario could put government finances in a precarious situation.

As such, we urge the federal government to identify and, more importantly, commit to a specific fiscal anchor to guide its future spending decisions. Our concern is that, beginning with the 2020 Fall Economic Statement, the federal government has announced several different fiscal guardrails or anchors, but has abandoned each in turn.

We believe it’s also critically important that any effort to reduce federal deficits focus on the expenditure side of the equation. Inflation-adjusted per capita government spending in Canada is at its highest level on record, outside of COVID. With a slowing economy, affordability concerns for households, stagnant business investment, and falling productivity, now is not the time to increase taxes on Canadians or businesses.

Thank you for considering our priority areas as you prepare this year’s budget. We look forward to continuing to work with you and would welcome the opportunity to meet to discuss these priorities further. 

Sincerely,

Adam Legge

President

cc: Andrew Bevan, Chief of Staff to the Deputy Prime Minister and Minister of Finance
Bud Sambasivam, Director of Policy for the Deputy Prime Minister and Minister of Finance
Hannah Wilson, Policy Advisor for the Deputy Prime Minister and Minister of Finance
Galen Richardson, Senior Regional Advisor, West and North for the Deputy Prime Minister and Minister of Finance
Chris Forbes, Deputy Minister for Finance Canada

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